How Recreational Cannabis Pricing in Canada Could Shape Up

How Recreational Cannabis Pricing in Canada Could Shape Up PART 1 OF 5

How Recreational Cannabis Pricing in Canada Could Shape Up

By Adam Jones
|
Feb 14, 2018 1:58 pm EST

Investment in cannabis

There has been a great deal of enthusiasm recently among investors (MJX) when it comes to cannabis stocks. Of course, the biggest catalyst for sales growth has come from recreational use in Canada. In addition, an increase in medical and recreational cannabis use around the world may also drive sales growth for these companies.

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Statistics Canada estimates that about 5.7 billion Canadian dollars were spent by 4.9 million Canadians ranging from the age of 15 to 64 on medical and non-medical cannabis in 2017 alone. Because cannabis is not legal in Canada yet, the black market supplies to recreational users. This active market for recreational cannabis is what the well-established cannabis producers are racing to grab.

Rationale for legalization

One of the rationales for legalizing cannabis in Canada is to displace the illicit cannabis market and reduce cannabis-related criminal activity. There are camps for and against this rationale. Some believe that legalizing cannabis will divert traffic away from the illicit market to the legalized market for quality and safer products, while others believe that the illicit market will continue to exist, as it will severely undercut the legal market through aggressive pricing.

This brings us to an important point of discussion on cannabis pricing, which could shape the cannabis market and determine profitability for cannabis producers such as Canopy Growth (WEED), Aurora Cannabis (ACB) (ACBFF), Aphria (APHQF), and MedReleaf (MEDFF).